With November trading coming to a halt and with the indices moving higher and higher, several things happened that had never happened before for the SPDR S&P 500 ETF (NYSE: SPY).
First, the Spyders have gained ground in each of the last 13 months, the longest monthly winning streak ever for the original U.S.-based ETF. The Spyders started trading in January of 1993 and that helped launch the now massive ETF market. Since the SPY started trading we have seen several bull markets, but never one that has taken such a sharp trajectory as the one we are presently in.
The other first that happened at the end of November is that the 10-month RSI, a traditional overbought/oversold indicator, closed a month above the 90 level. The traditional demarcation point for an overbought level is 70, so this should give you a good idea of how overbought the market is presently.
With stock indices at all-time highs and the market seeming to find a reason to climb higher each and every day, we have also seen a tremendous rise in the Consumer Confidence Index. In fact the most recent release, which measured data through November 14, was the highest reading since November 2000. The most recent reading was 129.5 and that is among the top seven percent of readings since the index was first released in 1977. The chart below came from an article on AdvisorPerspectives.com and I think it does a great job of showing just how high the reading is and how the high reading could be something to be concerned with going forward.
The fact that the last time the readings were this high was right at the beginning of the bear market should be reason enough for concern, but the chart also shows how extreme readings in confidence have preceded recessionary periods in the economy in many instances.
While I am not suggesting that investors should rush out and sell all of their stock holdings today, I do think it would be wise to proceed with some caution. I know a lot of Wall Street analysts are calling for double-digit gains again in 2018, but I don’t see that happening. I think we are likely to see a see-saw type year like we saw in 2015 at the very least and a correction in the first half of 2018 is certainly possible.